Negotiable instruments, such as checks, for example, typically provide a safe and convenient method for individuals to purchase goods and/or services. To use a check, an individual usually must open a checking account, or other similar account, at a financial institution and deposit funds, which are then available for later withdrawal. To pay for goods and/or services with a check, a payor (i.e., a buyer) usually designates a payee (i.e., a seller) and an amount payable on the check. In addition, the payor often signs the check. Once the check has been signed, it is usually deemed negotiable, meaning the check may be validly transferred to the payee upon delivery. By signing and transferring the check to the payee, the payor authorizes funds to be withdrawn from the payor's account on behalf of the payee in return for the goods and/or services provided by the payee.
Negotiable instruments, such as checks, have certain advantages over other forms of payment, such as cash. For example, while often considered the most liquid type of asset, cash also may be the least secure. Unlike a check, for instance, cash is usually freely transferable and does not have to be endorsed. Thus, an owner and possessor of cash is most often the same individual. Because cash is freely transferable, cash that is lost or stolen typically cannot be recovered. Therefore, the risks associated with cash transactions are often undesirable, particularly with respect to transactions not conducted in person (e.g., by mail) and/or involving large sums of money. A check, on the other hand, provides a payor with more security because the check usually requires a payor to specify both the person and amount to be paid. Furthermore, as noted above, the check is usually not valid until it is properly signed by the payor. These safeguards help to reduce the risk that money will be lost and/or stolen and ensure that the proper payee receives the proper amount of money.
Cash may have other disadvantageous as well. For example, because cash is freely transferable, there may be little or no verifiable transaction history. It is often desirable for a payor and/or payee to have physical proof that a particular transaction took place. This typically requires that the payor receive a receipt. However, receipts may contain errors and can be easily misplaced. In contrast, a bank processing a check will ordinarily create a transaction history, which may include the identity of the payee, the amount to be paid, the date of the payment, and the signature of the payor. This enables both a payor and payee to independently verify the accuracy of most transactions involving a payment by check.
While a check may provide a payor with a convenient and secure form of payment, receiving a check may put certain burdens on the payee, such as the time and effort required to deposit the check. For example, depositing a check typically involves going to a local bank branch and physically presenting the check to a bank teller or an ATM. In addition to the time commitment that may be required, visiting a bank branch may be problematic for the payee if the bank's hours of operation coincide with the payee's normal hours of employment. Thus, the payee may be required to leave work early and/or change work schedules.
A check may pose other burdens for the payee. As noted above, a check may not be freely transferable, thereby limiting the payee's ability to use funds from the check. For example, it is usually difficult to for the payee to purchase goods and/or services using a check issued by the payor. While the check may be endorsed and accepted by a third party, such transactions are often disfavored because the third party may not know the payor and, thus, may not be willing to accept the risk that the payor has sufficient funds to cover the check. Therefore, the payee may not have access to the funds from the check until the payee deposits the check at the bank, the check has cleared and the funds have been credited to the payee's account. The payee may have to wait even longer if the payee chooses to deposit the check by mail.
Even if the payee deposits a check with a payee bank, this may not be as advantageous, in some instances, as depositing the check with other non-payee banks, such as payor banks, intermediate banks, or third-party enterprises. For example, a payor bank may be a more convenient place or site to deposit a check. Additionally, it may provide for faster access to funds upon deposit.
If a payee deposits a check, this check can be cleared by sending a digital image of the check from a payee bank to some bank downstream. However, since digital images may be large and/or may lack the required resolution to act as substitute checks, other ways of clearing checks without using digital images is needed.
Finally, given the large volume of checks that a member may come across, the member may not be aware of the various different sources from which the checks were either drawn on the member's account or deposited to the member's account.
Therefore, there is a need for mechanisms for remotely depositing negotiable instruments, such as checks, with non-payee financial institutions, being able to clear checks without relying on digital images, and being able to display checks associated with an account no matter the source of the checks.